Dynamic Export » Corinne Campbell

How to price your product for export

Corinne Campbell — Tue, 19 Jul 2011 23:10:21 +0000

The price you choose to sell your product overseas will be one of the major contributors to your competitiveness, and will impact both the number of sales and your profit margin. In order to determine the right price for a specific market you will need to:

1) Analyse your costs

There are five main factors relating to cost that you should consider:

The cost of producing your product:
This should include all your production costs, as well as modifications for export compliance, standards compliance, translations of labels, packaging, etc.
The cost of marketing your product:
Your choice of market entry will impact on your marketing costs, e.g. Entering a market through agents, distributors, directly to end-users, on-line, etc.
The cost of exporting the product:
Freight costs, customs costs, licenses, currency hedging, insurances, This includes the cost ofprotecting your product: Trade marks in country of export, etc.
The cost of promoting the product:
Promotional material, translations, trade shows, etc.
The cost of financing the export:
The impact on your cash flow. The length of your trade cycle will be stretched when exporting. To export, you may need substantial funds upfront to pay for production costs and only receive payment for your export at a much later date. It can leave a gap in your cash flow and put severe strain on your working capital.
The unique features of your product:
Your Unique Selling proposition (USP). What differentiates your product from others in your target market.
The quality and design of your product:
How it compares with the other products in the market of entry
The impact of dramatically increasing your production:
Can you get extra staff, warehousing space, extra raw materials, etc.
The legality of your product in the country of export:
Are there any export restrictions imposed by Australia? Is the product allowed to be sold, are there any customs restrictions for entry, etc.
The cultural impact of your product:
Does the product fit the culture of the country. For example, does it conflict with their religion, politics, etc.
The product standard:
Does the product and the labeling comply with their industry standards
The warranty/product support:
What system will you have in place for defective and/or damaged products and customer service.

2) Analyse your product

The unique features of your product:
Your unique selling proposition (USP). What differentiates your product from others in your target market.
The quality and design of your product:
How it compares with the other products in the market of entry
The impact of dramatically increasing your production:
Can you get extra staff, warehousing space, extra raw materials, etc.
The legality of your product in the country of export:
Are there any export restrictions imposed by Australia? Is the product allowed to be sold, are there any customs restrictions for entry, etc.
The cultural impact of your product:
Does the product fit the culture of the country. For example, does it conflict with their religion, politics, etc.
The product standard:
Does the product and the labeling comply with their industry standards
The warranty/product support: What system will you have in place for defective and/or damaged products and customer service

Planning Your Transport Logistics

Corinne Campbell — Tue, 31 May 2011 06:33:31 +0000

Whether your export volumes are large or small you need to develop a transport logistics plan. To do this you must find a good freight forwarder, choose an option between a full container load or a consolidation, and decide whether to send your goods by air or sea.

Choosing the right freight forwarder

A freight forwarding service can handle all of your logistics tasks by acting as an intermediary between you and various transportation services. Sending products from Australia to another Country can involve a multitude of carriers, requirements and legalities. Freight forwarding services guarantee that your products will get to a destination on time and in good condition. Freight forwarding services also negotiate the best possible price on your behalf and help you work out the best routes. In simple words, the freight forwarder is the middle man between you as the shipper/exporter and the truck company, airline or shipping line.

Forwarders come in all sizes, from the one-man band sole traders to the extremely large multi-nationals with offices in every part of the globe.

Depending on your needs, here are some questions to help you choose the right freight forwarder for your business:

Is the forwarder willing to offer advice on freight or customs requirements?
Do they have a network of offices in your country of export?
Can they offer an “integrated service” from door to door?
Can they take out marine insurance for you?
Do they have competitive service rates?
Can they provide you with order tracking?
Do they have internal licensed customs agents or use external ones?
Do they have their own warehouse or handling facility?
Are they a licensed regulated agent for air freight?
Are they IATA (International Air Transport Association) approved?
Do they have trained personnel in dangerous goods, security procedures, export and import procedures

Learning Centre: Export Restrictions

Corinne Campbell — Wed, 04 May 2011 02:06:34 +0000

You can save yourself a lot of time, energy and money if you run a few checks before you dive into exporting. Number one: check that your product is allowed to be exported and also allowed to be imported into your country of choice before doing the hard yards of working out your costing, market, product standard, cash flow, investment needs, servicing capability and so on.

Restrictions on exporting your product from Australia

A business can export almost anything out of Australia. Products that are not allowed to be exported, or need an export permit or have restrictions placed on their export include: certain primary products, dangerous goods, military equipment, aboriginal artefacts, hazardous waste, cultural products, chemicals, animals, primary products, drugs, plants, gemstones, and metals. So before exporting you should check with Australian Customs.

The Australian Export Control Act of 1982, divides products into ‘prescribed’ and ‘non-prescribed’ goods. Depending on what you want to export, the requirements you must meet will vary. Examples of prescribed goods are: dairy, live animals, fish, plants, plant products, eggs, meat and meat products, grain, animal food (frozen raw meat), organic produce, fresh fruit and vegetables, dried fruit, pharmaceuticals (raw animal material) . Non-prescribed goods are all other goods.

Some prescribed goods intended for export must be prepared at registered premises. This means that your premises must be constructed, equipped and operate in an effective and hygienic manner, and be approved by the Australian Quarantine and Inspection Service (AQIS). You can begin export operations when you receive notification of approval by AQIS and (where required) overseas government authorities. Check AQIS for more information.

Restrictions on the import of your product overseas

Every country can have either absolute prohibition, (which means that you are not allowed to export the goods to them under any circumstances,) or a restriction, where you need to have written permission, usually in the form of a permit, in order to have your goods allowed in their country.

The import can be restricted because of Sanctions. Trade sanctions are trade penalties imposed by a country (or group of countries) on another country (or group of countries). Typically the sanctions take the form of import tariffs (duties), licensing schemes or a permit. They tend to be imposed because of unresolved trade or policy dispute. For example, one country may find that another is unfairly subsidising exports of one or more products, or unfairly protecting some industry sectors from competition. The first country may retaliate by imposing import duties, or some other sanction, on goods or services from the second country. Check the import tarriff in the country of import; your freight forwarder or the importer should be able to help you.

Economic sanctions are not always imposed because of economic circumstances. Sometimes they are political. For example, the United States has imposed economic sanctions against Iran for years, on the basis that the Iranian government sponsors groups who work against US interests. The United Nations imposed stringent economic sanctions on Iraq after the first Gulf War, as an attempt to make the Iraqi government co-operate with the UN weapons inspectors’ monitoring of Iraq’s weapons and weapons programs. These sanctions were unusually strict in that very little in the way of trade goods were allowed into or out of Iraq during the sanction period. If you think your chosen destination country might be subject to a sanction, check with the Department of Foreign Affairs and Trade.

True cost of export documentation

Corinne Campbell — Tue, 28 Apr 2009 09:19:57 +0000

Fourth in our series on ‘The True Cost of Exporting’ is the cost of export documentation, a necessary expense that can be eased by knowing what’s required. Here are some ways to tighten up on export documentation.

Organising the right documentation and paperwork makes the export process simpler, smoother and cheaper. When it comes to a paper trail in export, it doesn’t matter if you are shipping large volumes or just sending a few samples: the goods have to get there and the exporter has to get paid. Not having the right paperwork can result in an importer not being able to accept the goods and the exporter not being paid, which is costly in terms of time and money.

Export documentation covers the spectrum of: shipping documents, commercial documents, inspections, permits and consular stamps. Each requires preparation time, courier costs and fees with its associated risks of mistakes adding to delays and considerable costs.

Shipping documents
There are strict requirements when declaring goods for export that require an Export Declaration Number (EDN), which is used to report a specific consignment of cargo for export from Australia and may be lodged up to six months prior to the intended date of export. The EDN can be issued at a cost by your freight forwarder, or you can use software that will connect you directly to Australian Customs. Any inaccuracy of the information given to customs can result in a legal infringement, even five years down the track so make sure you amend the declaration post shipment if the details have changed, e.g. short shipment, late shipment, and so forth.

An exporter has to provide the details to appear on the bill of lading to the freight forwarder. A bill of lading can show at least two different modes of transport from road, rail, air, and sea. The customer usually needs an original BOL as proof of ownership to take possession of the goods. If dealing with a letter of credit, the accuracy of the information is essential. One word missing and the importer will consider the document to be ‘discrepant’ and can refuse to accept the goods. This will result in having to return the goods to Australia, or quickly finding a new buyer in the country of cargo discharge, or even arranging to destroy the goods to avoid paying port demurrage fees.

Airfreight shipments are handled by air waybills, which can never be made in negotiable form, unlike a bill of lading. In the case of a letter of credit, the goods in the air consignment are consigned directly to the consignee named in the letter of credit. Unless the goods are consigned to a third party like the issuing bank, the importer can obtain the goods from the carrier at destination without paying the issuing bank or the consignor. Therefore, unless the exporter has received a cash payment or the buyer’s integrity is unquestionable, consigning goods directly to the importer when shipping by air carries a high risk of not getting paid.

Commercial documents
A commercial invoice is a bill for the goods from the seller to the buyer. Governments often use these invoices to determine the true value of goods when assessing customs duties. Governments that use the commercial invoice to control imports will often specify its form, content, number of copies, language to be used, and other characteristics. It should describe the shipment of goods and show information such as the consignor, consignee, and value of the shipment.

If the right information is not displayed on the invoice, the importer could have delays and problems clearing the goods, or if the value or the description of the goods is not specified clearly, the importer could end up paying more import duty and taxes than necessary. Some countries require an invoice certified by the consulate of the foreign country stationed in Australia to verify the value, quantity, and nature of the shipment; without this certification, the importer risks being unable to clear the goods.

A certificate of origin is a document required in certain countries and for certain products and quite commonly needed when dealing with free trade agreements. It is a signed statement as to the origin of the export item. Certificate of origin are usually signed through an official organisation, such as a State Chamber of Commerce. Usually, an exporter can lower the cost by becoming a member of the organisation issuing the certificate and using an organisation that accepts electronic documentation, reducing courier cost and time.

An importer might not trust that you will provide them with quality goods, or the country of import might require an inspection certificate to clear the goods. This is usually performed by a third party and often obtained from independent testing organisations or a government department such as AQIS. Depending on the amount of testing or inspection needed, the cost can quickly add up.

Certain products require an export permit by the relevant government organisations or industry groups authorising the export of specific goods in specific quantities to a particular destination. If a permit is required, make sure you have accounted for the cost and issue time as it might not be possible to ship the goods until received.

When creating an export packing list, make sure to include considerably more details than a standard domestic packing list. You need to itemise the material in each individual package and indicates the type of package, such as a box, crate, drum, or carton. It also shows the individual net, legal, tare, and gross weights and measurements for each package. Package markings should be shown along with the shipper’s and buyer’s references.

An insurance certificate is used to assure the consignee that insurance will cover the loss of or damage to the cargo during transit. If you are exporting in accordance with the incoterms CIF, DES, DEQ, CIP, DAF, DDU and/or DDP, it is important to consider marine insurance.

Documentation must be precise because slight discrepancies or omissions may prevent merchandise from being exported, result in non-payment, or even result in the seizure of the exporter’s goods by customs. Most documentation is routine for freight forwarders and customs brokers, but the exporter is ultimately responsible for the accuracy of its documents.

The number and kind of documents the exporter must deal with varies depending on the destination of the shipment. Because each country has different import regulations, the exporter must be careful to provide all proper documentation. It is important to do your research with customs, your industry association, government departments, freight forwarders and the overseas buyer to be fully aware of the procedures per product and per country of export.

It would be a waste of time and money to go through researching the specific needs of your export and not having the internal knowledge to implement a process. Training yourself and your staff in the intricacies of export including documentation, logistics, finance as well as cultural issues can make the difference between being successful for years to come or failing after the first shipment.

International trade carries high levels of risk. Knowing how to avoid the pitfalls is the key to success.

—Corinne Campbell is the founder of Xdoc, a company specialising in helping businesses mitigate import/export risks by providing information, knowledge, education and support. For more information, visit www.xdoc.com.au

Glossary
Bill of lading (also BOL or B/L): Acknowledges that specified goods have been received on board as cargo to a named place for delivery to the buyer.
Demurrage fee: Charged according to a level of damage and payable for delays in loading or discharging the vessel.
Letter of credit: A contract issued by a bank authorising the payment of money to a beneficiary against specific documents evidencing the shipment of goods.
Incoterm: International commercial terms

What affects document costs?
There are no hard and fast rules about how much export documentation will cost you but as a general guide, the final figure will depend on what you’re sending, where you’re sending it, and the method of payment.

Perishable items need more permits, and would also require closer inspection by quarantine, for example, so you would need to factor that in. Some countries may just require an invoice, while others are more rigorous when it comes to paperwork. The method of payment and the checks required to ensure the goods have been paid for, and by whom, will also affect costs.